ABOUT SEAN STANNARD-STOCKTON

Sean Stannard-Stockton is the president and chief investment officer of Ensemble Capital Management, located in Burlingame, CA, midway between San Francisco and Silicon Valley. From 2006 through 2012, Sean authored the Tactical Philanthropy blog and wrote regular philanthropy columns for both the Financial Times and the Chronicle of Philanthropy. In 2012, Sean officially ended the blog to focus on growing Ensemble Capital.

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Philanthropy 2.0

October 1, 2009 – 8:17 am

Lots of people have used the terms “Philanthropy 2.0”, “New Donors” or other phrases that suggest that something has fundamentally changed about the field of philanthropy. The subtitle of this blog is “chronicling the second great wave of philanthropy,” which also implies that something new is replacing an older approach (I described the second great wave in one of my first posts on this blog three years ago).

Altruism vs. Enlightened self-interest: I might replace “altruism” with “sacrifice” or “obligation”. But either way it gets to the idea that donors have begun to shift to thinking about philanthropy as a non-zero sum game. Giving to a nonprofit does not benefit the nonprofit and hurt the donor, if done right it can enhance the well being of everyone involved.

Problems vs Solutions: I think philanthropists have always looked for great solutions, but there is a way in which solutions have gotten more attention recently. For instance, microfinance has captured so much attention due to the solution itself. It is not the plight of poor women in India that so many donors are focusing on, it is the solution of microfinance.

Services vs. Impact: Focusing on delivering impact is probably Philanthropy 3.0. But donors today are focused more on results or “outcomes”. They are getting more interested in the difference a nonprofit’s programs are achieving rather than the activity the nonprofit is engaging in.

Single donors vs. Community of believers: Donors have always gathered in various communities, but today there are more and more people thinking about co-funding, funder collaboratives and other ways that they can leverage their giving through interacting with other donors. In addition, as nonprofits move from fundraising to “friend raising”, they are recognizing the power of building a community of supporters and donors are beginning to see the value of this community as well.

Donations vs “Sustainable Revenue Streams”: I’m guessing the authors of the report meant earned income when they wrote sustainable revenue. There is more of a focus on earned income, but sometimes I worry that elevating earned income as somehow superior to donations forces nonprofits to shift their attention away from their mission. Donations are sustainable. In fact, the volatility of donations is lower than GDP and so on a national level donations are more sustainable and predictable than income. But there is a push for a more sophisticated approach of understanding how a nonprofit can create a sustainable business instead of hoping to close the budget each year.

Top-down vs. Bottom-up: This is the big one. This is the core of my original definition of the second great wave of philanthropy: “While the traditional top-down hierarchical system describes the way Rockefeller’s foundation distributed grants to charities, which then provided services for the public, a flat structure is the model of the Second Great Wave. This shift acknowledges that no one person or entity has all the answers and instead leads to a virtuous cycle of information feedback. The philanthropists of the 21st century will be smaller in size, but much larger in numbers than the philanthropists of the last century.”

Few vs Many: I agree here too, except I think the point is captured in top-down vs bottom-up. The “democratization of philanthropy” is in full swing. In 1980 about 6% of Americans were invested in the stock market. By 2000, it was more than 50%. The baby boomers that fueled that move during their retirement planning years are now retiring and hitting peak giving years. I would suggest that today something like 6% of Americans are engaged in proactive, intentional philanthropy, but that within 20 years we might push that number north of 50%. While the exact numbers are up for debate, I think that directionally the trend is clear.

What do you think of the Philanthropy 1.0 vs 2.0 framework? Plenty of people told venture philanthropists in the 90’s that they weren’t doing anything that the Ford Foundation wasn’t doing in the 1950’s. Philanthropy does have a tendency (like most fields) to always believe that “this time is different” and that everything has changed. Does the New Donor even exist?

Let me know what you think.

Note: You can learn more about the BBMG report by reading Lucy Bernholz’s take here (she focuses on an entirely different segment of the report) and you can read the report yourself by clicking here.

5 Comments

Thanks for your sharing your thinking around our white paper. And you’re right. Re: donations vs sustainable revenue streams, we did in fact mean earned income – appreciate the opportunity to clarify. (In our minds, earned income on its own isn’t necessarily superior to donations, but it seems that multiple income streams can, in many instances, enhance a nonprofit’s effectiveness.) Just one more way we see philanthropy evolving…

On a broader note, we believe philanthropy’s capacity to deliver practical benefits/personal relevance (e.g., enlightened self-interest) has big implications for communications and how nonprofits position themselves.

Our own efforts began with a white paper making the case for enlightened self-interest and a new economic paradigm proposing a model of business with social purpose. It was delivered to President Clinton’s re-election committee and published on the web several months later.

Proof of concept came in sourcing the highly successful Tomsk initiative in Russia and later in making the case for economic “smart bombs” as an alternative to cruise missiles in Crimea.

Tomsk delivered 10,000 businesses through microfinance assistance and 36 spin off social projects.

In the ‘Marshall Plan’ paper delivered to Ukraine and the US Senate, calling for investment in sustainable development to remove the vicious cycle of poverty, we made the case for deploying was was being spent each week in Iraq through a social investment fund to leverage social enterprise, together with profit yeilding broadband which would fund the concept of home for all children.

These are not theories, but 10 years of business investing in social purpose. Both Tomsk and the Ukraine national strategy serve as illustrations of the concept of a social impact bond.

The chart seems derived from an attitude that individual philanthropists are evolving. That’s what I read into the language.In the spirit of where-you-stand-depends-on-where-you-sit, I wonder how that chart might look if it was derived only from professional staff? I am thrilled by the growing confidence, sophistication and creativity of the new wave of philanthropy…it has done much to shake up established philanthropy. But in the same way institutional investors operate differently and have a different influence in the market than individual investors do, so too do larger, more established philanthropies. I think the attributes of 1.0 vs. 2.0 aren’t monolithic.

Also, in full disclosure, we have worked with BBMG in various capacities over the years.

Not only do the new donors exist, but they seem to be seeking less rigid relationships when approaching gifting opportunities. A model from computer science might be distributed systems with no or little central control. In software we might think of the open source and open content movements and how they challenge hierarchal creation, production, and distribution.

Changes have just begun, but we are leaving the bureaucratic age.

I have created a mashup of RSS feeds on Charity 2.0, Philanthropy 2.0, and nonprofit 2.0 subjects at http://www.squidoo.com/charity2point0 It’s interesting to dip in a cup and taste what’s newest as it flows past.